Show Me the Customer

Despite the lurking presence of customer transactional data in many back-office systems, organisations never did much with it in the past. Today, the shortage of tools to manage customer information has become but a distant memory. Now we have such a surfeit of customer-oriented software that we have too many places to put those useful little facts about customers and how we've dealt with them.

The first in a three-part series on staying in touch with the customer With research suggesting 81 per cent of CEOs feel they don't know their customers and 51 per cent saying IT hasn't helped, the race is on to develop solid relationship management solutions for competitive advantage. But enterprise-level customer relationship management (CRM) solutions are notoriously expensive and complex. Statistics suggest CRM projects have a 70 per cent to 80 per cent failure rate, and costs can outweigh benefits -- not least because of employee resistance to imposed solutions. The picture isn't helped by myriad confusing visions for, and approaches to, customer relationship management, with every vendor and his son trying to position themselves as being somehow in the CRM market space. One reason for project failures may be an overemphasis on technology. As GartnerGroup points out, CRM involves more than the integration of information and technology from various parts of the enterprise. Rather, it needs a new business model, driven by an appreciation of customer relationships as the enterprise's most valuable asset to be guarded and cultivated in every interaction. That demands changes in strategy, investment, operational processes, and organisational skills and relationships.

In an effort to explore other reasons for CRM failure, CIO asked three authorities -- an academic, a consultancy and a user organisation -- for their perspectives about the golden do's and don'ts of CRM.

Looking for a Relationship?

In 1991 Monash University senior lecturer marketing David Ballantyne co-authored the first and still leading international text on managing customer relationships, Relationship Marketing: Bringing Quality Customer Service and Marketing Together. According to Ballantyne, CRM projects often fail because of a tendency to confine them to technology-based ways of organising information about customers and lack of an integrative perspective that could bring technology and theory together. "I see customer relationship management as a subset of a broader idea and broader set of values concerning relationship marketing and management" Ballantyne says. "It has been promoted as a box; but if you just buy the box, you don't know where the box should go, and it doesn't work. It just costs a lot of money, and that is what, of course, will happen in many cases." Ballantyne says customers resist being managed. Try to force them to accept what they don't want and they'll leave. Instead, organisations should consider five ways to make customer connections.

1. Marketing management traditionally understands the market in terms of a product portfolio, but to make customer connections one must create a portfolio of relationships. "The thinking person's approach to CRM is to understand that there is a movement from products to relationships as a perspective on business management," Ballantyne says. "Then following from that, the segmentation step is to create a portfolio of relationships so you have different kinds of relationships. In this way partners are placed in a different segment to loyalty program participants, which might also be segmented by kind -- say, business vs private. The relationship with a private loyalty program member will be entirely different to that with a partner, where there is an ongoing sharing of strategy and operational issues. "And in thinking about relationships, avoid like the plague any notion of 'customer intimacy'," he says. "Always the language of CRM and marketing is about getting close to your customer -- screwing your customer, more like. Where is there in the world of technology anything that gives some equivalence of value? What you've got is some hot database and an intense marketing effort to capture your customer.

That's not a relationship. The whole ability and capability of technology is very easily skewed to short-term gain. And it fails."2. Be cautious about how you determine high value and high potential value relationships. If you use an "archaeological slice" of your customers to determine which are of high value, you will only identify those customers that are of high value at that time. IT will only capture the dynamic of growth if the organisation takes a time-based view.

Consider the ANZ bank's much criticised recent decision to introduce fees on young adult accounts, Ballantyne says. "They are taking a slice of profitability where they are comparing the savings accounts of 20-year-olds with no money in them, and high transactional value with the accounts of 55-year-olds where there is some stability and less transactional volume. They are saying: 'We want more of the 55-year-olds' accounts'. What they haven't worked out is that the 55-year-olds got there by being 20-year-olds, and the 55-year-olds don't change banks, but the 20-year-olds do. You miss that point, you've missed it all." The lesson is to focus not only on high value but also high potential value relationships. Identifying those requires judgement and wisdom, not technology.

3. Use smart databases to increase your knowledge of customers to increase the relationship value. A database can hold knowledge in ways the little mum and dad corner shops used to do -- names of children and birthdays as well as age, address and postcode -- anything that might be relevant to the sense of attachment between customer and company.

"All these things allow filtering and ordering in different patterns: by customers, by value, by postcode, by car type, so comparisons are enabled. This helps clearly in targeting according to kinds of behaviours. Increasing your knowledge is really about increasing your knowledge of customer behaviour to increase the relationship value," Ballantyne says.

4. Use the technology not only to capture but circulate knowledge so that all points of the organisation can share information.

"With the new technology you can have information available on computer terminal by various codes by various people, so there is no secret information here: it's sharing of common knowledge," Ballantyne says.

5. Find new and surprising ways to create value for customers. Too many marketers claim they are meeting customer wants and needs without having a clue what that really means.

"I think you work it out this way: you ask 'what is my customer trying to do?'," Ballantyne says. "We're all doing something, and the company that adds value is the company that understands the customer's goals and then facilitates those. The issue then is: can we as a company do for the customer what the customer is trying to do, more economically so that they will be prepared to pay for it?" The smart company distinguishes between means and ends, or a customer's activities and goals or their pathways and goals, and "laser beams" onto the goals, he says.

Essential Ingredients

Consultancy SPL WorldGroup is an international provider of information technology (IT) consulting and enterprise solutions for organisations with large-scale information processing and distribution needs. According to director Customer Management Systems Mark Camilleri, while people who get CRM right are reaping rewards the ERP market can only dream of, CRM is all too easy to get wrong. And that applies doubly in Australia, where we're at least five years behind the US in our habit of treating customer service as an oxymoron.

Camilleri has some pragmatic tips about the essentials that will help avoid project failure. 1. Get the CEO on board. Unless there's a positive business case and a vision and a passion for CRM that's driven from the very top, the project will fail. "CRM is breaking new ground. A lot of companies have put in financials, manufacturing; they're probably on their third or fourth iteration of that, so they've been attuned and accustomed to those sorts of systems. But CRM is bleeding-edge stuff, and unless you get the CEO turned on, you're still going to get the stove-pipe mentality," he says.

Where there are separate sales, marketing, accounting and other systems moving to different tunes, a CRM initiative can prove very threatening. Suddenly marketing is more accountable and sales reps can be tracked as they follow leads and can no longer get away with "premature elaboration". If it is driven from the very top CRM is much more likely to succeed.

2. Train senior executives and gather their requirements. "Put technology in the top drawer for the moment and leave it there," Camilleri says. "Let's actually see what your business objectives are, what are your processes, what are your marketing objectives, and let's see how effective those processes are." Failures in training and human resource management are amongst the top three reasons why CRM projects go wrong, he says. "You'll find it doesn't matter how good the software is, if people don't have the right attitude to customer service you just can't bring a horse to water, you've got to shoot it.

You need a CEO to make those hard decisions." 3. Think big but implement small. Too many organisations whose CRM systems fail do it the other way around. "While it's important to detail all your requirements and processes in the big picture, implement small, perhaps starting in sales force automation, the call centre or the help desk," Camilleri says.

4. Move fast. You simply can't take a year to evaluate this technology, because if you wait that long to implement after defining your requirements, they will probably have changed several times. Then you'll find yourself implementing last year's business processes or reacting against last year's competitors.

5. Beware vendors that fail to provide back-end integration. "This is why I get annoyed with the vendors in the marketplace. These guys can show you a great demo, and people think they're getting everything -- from somebody making their cup of coffee to retaining 100 per cent of their clients," Camilleri says. "The big element missing from that is the back-end integration piece. These systems are like putting lipstick on a pig. You've got the nice colourful GUI stuff, you've got the user object configuration, and that's all fine; but if you want to get data that's somewhere in a big mainframe, these systems aren't going to do it without clever middleware."Camilleri knows one leading company that has implemented a CRM solution from a top-tier vendor but is going back to yellow sticky notes and Excel spreadsheets, because it is taking sales people 30 minutes to get information from the back end. Go into a pilot phase to determine what information staff need real time and what can wait to be done in batch, using the most vociferous, boisterous sales rep on staff, he advises.

Temptations To Avoid

When an organisation's CRM solution does revolve around a box solution, refusing to yield to a range of temptations may be the key to success, says Megatec project manager Ian Rutherford. A high-end software distributor and systems integrator headquartered in Melbourne, Megatec has 100 employees and offices in Sydney, Brisbane and Perth. The company found using Symantec's ACT! contact management system just wouldn't wash as a CRM strategy. Megatec was suffering too many difficulties, including a multitude of distributed databases, duplication of data, lack of communication with other offices, an inefficient marketing base, no reporting on customer data or sales opportunities, and the lack of a call centre solution. Now, using Onyx Customer Centre, it is gaining benefits in three different areas of the business. Sales has information about customers they've never had in such integrated form, including full details of all customer technical support calls. Marketing has better management and more targeted lists. And technical support has an automated rather than a manual system, allowing productivity gains via better record keeping. But according to Rutherford, simplicity was key to the company's approach to CRM, and a high degree of self-discipline and strict adherence to a "modest" project scope was essential to that success.

"Once you start trying to manage customer information organisation-wide, the scope can very easily get quite large, and we found there were quite a few temptations along the way. We saw up front the potential was we'd get side tracked and never actually finish," he says. "So we set our scope as being deliberately modest. We wanted to be able to put something in that gave the organisation an immediate benefit, and we didn't want the project to be more than about three or four months long. So we made it short and tight and stuck to that brief throughout the project." Along the way Megatec resisted a range of temptations.

1. Integration with legacy systems. Megatec had both a customer address book and a financial system holding customer data. "In an ideal world you'd want them to be in line, and you'd want that to happen automatically," Rutherford says. "But that was the sort of thing that could have added several months to the project. We still haven't done it, and we haven't felt the penalty for not doing it."2. Sales analysis. In that same ideal world Megatec would link sales information back to the customer management data. Instead, it adopted a compromise approach by using its in-house expertise to build a simple external system that met all its sales analysis needs. "Instead of trying to integrate [sales analysis] it with the product [Onyx] and have one thing that did everything, we say the best place for this is outside [the product] in the short term," he says. "Maybe there's something different that we'll do longer term, but personally I don't think so. So we used the data warehousing solution to integrate data from multiple sources, but external to the customer relationship management package." 3. Too broad a scope. Some product features seemed very tempting, but Megatec was careful to avoid adopting features the business wasn't ready for, including Web integration. "There were a few areas where we could spend time, and we will do so; but the reasoning we used was that we didn't really have the internal processes bedded down well enough to handle some things manually, let alone to have them automated," Rutherford says. "To have a customer hit our database automatically from the Web was probably going to give us more opportunity to treat them badly, by ignoring them, than for them to be impressed. Technology wasn't going to work until we had the basic housekeeping in place. Now, six months down the track we're starting to look at integrating that type of thing."Megatec also resisted the temptation to push customer support onto the Internet because there was no customer demand for Internet-based support and because it is currently solving customer problems very efficiently by telephone. "At the end of the day, I think talking to people is a very large part of solving problems," he says. "We had a system that worked and we didn't feel anyone was driving us." 4. Using dirty data. "One of the areas we could have embarked on readily would have been automated outbound features such as e-mail and fax where you can do large fax blasts and things like that," Rutherford says. "There was some back-end technology we could integrate which could do that, but we weren't confident we had a good database of people to work with, so we've left that.

Gradually as we're becoming used to how we manage our customers, and their information, we're getting more confidence in the database."One-Sided Finally, we need to go briefly back to academia to reflect on another caveat to uncritical adoption of CRM. According to Ballantyne, CRM is limited in being very one-sided. It might tell you everything you need to know about your customers without once revealing anything useful about your own organisation.

"You can go through everything I am saying and it means the company has no knowledge of itself, only knowledge of its customers," he says. "While consumer behaviour moves on another notch, are companies learning anything about their own organisational behaviour? It's only the matching of consumer behaviour with organisational behaviour that can achieve a useful relationship over time."Closing the Chasm Pat Sullivan, CEO of US-based SalesLogix the original creator of the ACT! contact manager, has some strong ideas of his own about the reasons for failure of CRM projects. He says technological progress over the last few years has actually caused a movement away from the fundamental concepts of relationship management, which in turn is causing many companies to fail with their CRM implementations.

According to Sullivan, successful CRM implementations have three key common values: - They empower front lines. Most CRM solutions just can't seem to get out of the way -- they attempt to extend management all the way down to controlling how people actually make calls to customers. - They create and link communities. Good CRM solutions focus on creating and linking communities of sales, marketing and customer support people, as well as channel vendors, suppliers and other front-office partners. These communities make up an interactive selling network. Each community needs to be addressed to match their specific requirements. - They create momentum. Good CRM solutions create momentum for implementations community by community, until the groundswell of support is so strong that everyone has accepted the system. They are actively and productively using it and achieving better results for themselves as well as generating almost immediate ROI for the company.

Who You Gonna Call?

Complex call centres can help collect information available on customer behaviour and preferences, making them potentially powerful vehicles for managing customer relationships. It's the convergence of marketing and sales, and that can put call centres at the centre of the CRM process. GartnerGroup believes by next year fully 70 per cent of customer interactions will pass through a call centre via electronic or voice communications.

But as IBM new business development director Geoffrey Forster points out, the bottom line is the need to service customers in the way that suits them.

"Customers are often quite happy to talk to a machine if it means they can get information, maybe over their mobile phone or late at night. But they won't be happy talking to a machine or maybe doing an Eftpos transaction at other times: if it's a complex issue, if they need a significant amount of help," he says.

And Australian Information Industry Association corporate relations manager Michael Hedley warns that consistency is essential across different contact points. "The days when you just put up information on your organisation on your Web site and there was no back-end integration that allowed customers to say, place an order or to make a phone call or complete part of the transaction on the Web, are over," he says.

Smarter Than the Average Card

Smart cards are starting to prove their worth in supporting dynamic and one-to-one customer loyalty schemes. But they can also help companies drill down on historical information to learn more about their customers' habits and target them effectively. According to IDC InTEP manager End User Programs Peter Hind, many Australian CIOs are considering smart cards' potential to build customer loyalty and gain information about buying habits. Gemplus Australia general manager John Atkinson is also seeing a lot of Australian interest. His company has been working on a number of different schemes in Australia for quite a long time. "Smart cards enable you to give loyalty recognition at the point of interaction with the customer," he says. "They offer immediacy, so therefore they have huge potential where you're talking on a daily basis with your customer. And they allow the customer to understand what loyalty means to them, because they're carrying their own information with them." For instance, the Playsmart Loyalty System was designed to fill a need in the hotel and gaming market for a secure system of passing player loyalty points between a group of participating venues. Information on every transaction is stored in a PC at each venue, 3DES encrypted for maximum security. At the end of each day the data from the PC is downloaded to the central office where it is decrypted and used for statistical and accounting information. Gemplus uses the data to provide demographic information to the scheme's sponsors on purchase trends.

Customers who get alienated by sitting in phone queues are unlikely to be impressed by the experience of sending e-mail into cyberspace then waiting days, weeks or forever for an answer. According to Forrester Research, building sales, service, and marketing strategies around Web-based systems will prove the only way to steer companies away from the unsolvable integration nightmare of multi-channel, multi-function customer relationship management.

In the Internet economy, high-quality customer service is an absolute requirement and current, haphazard approaches to customer management will destroy a company's future. Forrester says the new standard for customer service is "synchronous customer management": consistent, high-quality customer support across all channels and business functions, based on common, complete information shared by employees, their customers, and business partners.

But success relies on good service, and today that is in short supply. New York-based research group Jupiter Communications found nearly half of the top-ranked Internet sites offer poor service: 42 per cent of 125 leading sites either didn't answer customer e-mail for at least five days, didn't respond at all, or didn't bother to list an e-mail contact. For both consumers and businesses, the Internet is a medium of instant gratification. Delays may well encourage your customers to look elsewhere for theirs.

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